1. The future of financialisation
Malcolm Sawyer
University of Leeds UK

2. Outline What is financialisation
Trends in financialisation since the GFC
Financialisation and economic growth
The future of financialisation
‘Peak finance’
Roles of finance and the future

3. What is financialisation?
Introduction
What is financialisation?
Financialization means the increasing role of financial motives, financial markets, financial actors and financial institutions in domestic and international economies, societies, polities and the environment (adaptation of Epstein’s definition)
Vercelli: first (1860s through 1930) and second eras of financialisation (1970s onwards)
Features of second era: associated with globalisation and neo-liberalism

4. What is financialisation?
Introduction
What is financialisation?
Rapid increase in scale of financial sector in almost all countries
Variegated financialisation: that is widespread financialisation but at varying speeds and in various forms
Shifts from bank/institution based to market based; some fusion between them

5. What is financialisation?
Introduction
What is financialisation?
Growth of securitisation, derivatives etc.
More concentrated, less regionalised banking sectors
Internationalised banking sectors
Shifts away from mutual and public ownership in the financial sector

6. What is financialisation?
Introduction
What is financialisation?
De-regulation and financial liberalisation, spurred on by academics and international organisations
Rising inequality within nation states, and shifts in distribution of income from wages to profits and shift of income to the financial sector
Frequent occurrence of financial crisis
Large adverse effects of banking crises

7. What is financialisation?
Introduction
What is financialisation?
Finance and the ‘pursuit of shareholder value’

8. What is financialisation?
Introduction
What is financialisation?
The expansion of the financial sector into ‘new’ areas, e.g pension, housing finance
The rise of household debt

9. Trends in financialisation since the GFC

10. Ecuador

11. Trends in financialisation since the GFC

12. Ecuador

13. Financialisation and economic growth
Financial deepening (scale of the financial sector) is one key element of financialisation
Previous studies had generally shown positive relationship between economic growth and financial deepening: some questions on direction of causation, and on relative efficiency of bank-based vs. market based

14. Financialisation and economic growth
Many studies have recently found relationship has become negative over some range (inverted U-shaped relationship) with many industrialised countries operating on the negative part of the curve.
Why has the relationship changed?

15. Financialisation and economic growth
Publication ‘bias’?
Rise of household debt
Nature of what the financial sector does (though financial deepening often refers to banks and equity markets)

16. The future of financialisation
Within the FESSUD project foresight exercises conducted including Delphi study. Views on future scale of financial sector ranged between roughly no change and slower pace of increase.
Has there been ‘peak finance’?
How could the financial sector continue to expand?

17. The future of financialisation
Expansion of its role as facilitating savings and monitoring investment unlikely and may diminish
Expansion of financial sector into areas of social provision, e.g. pensions

18. Towards de-financialisation?
Role of re-structuring of the financial sector and institutions to focus on savings banks and investment banks
Role of taxes on financial transactions and activities